HOLDING ON TO YOUR HOUSE AS FORECLOSURES CREEP UP, NEW INDUSTRY GIVES HELPING HAND.Byline: BARBARA CORREA Staff Writer
Rising interest rates and a cooling housing market has made it a nail-biting time to be a homeowner.
Many Southern Californians who dove into tempting zero- percent-down loans with huge variable-rate risk now realize they may have bitten off more than they can chew.
The changing times are forcing some into foreclosure foreclosure
Legal proceeding by which a borrower's rights to a mortgaged property may be extinguished if the borrower fails to live up to the obligations agreed to in the loan contract. , but others are making use of their options and managing to hold on to their homes.
Take Bianca Garcia, a manufacturing production coordinator in Palmdale. Like many Southern Californians trying to buy homes as prices went through the roof and lenders opened up their wallets, Garcia secured her loan through a finance company instead of a conventional lender. It's an option to which many consumers with questionable credit turn on their first step into the housing market.
So in 2003, she and her husband paid $173,000 for a four-bedroom, two-bath house with a three-car garage in Palmdale. Two years later and 90 days in default on her loan, Garcia was on the road to foreclosure.
``We just had so much going out at the time,'' said Garcia, who is still living in her house, thanks to an arrangement she made with a mortgage investment firm.
The company, 2-year-old TerraCotta Group LLC (Logical Link Control) See "LANs" under data link protocol.
LLC - Logical Link Control , located in Manhattan Beach Manhattan Beach, city (1990 pop. 32,063), Los Angeles co., S Calif., on Santa Monica Bay; inc. 1912. It is a residential and beach community with an oil refinery and nearby factories that produce transportation and electrical equipment, computers, and pottery. , paid the first and second mortgages on the house, put it in a trust, and began work on repairing Garcia's credit. It plans to refinance Refinance
1. When a business or person revises their payment schedule for repaying debt.
2. Replacing an older loan with a new loan offering better terms.
When a business refinances they typically extend the maturity date. the house by the end of this year, and Garcia will then buy it back with a conventional lender.
Indeed, if there is some good news for homeowners who took out variable-rate loans Variable-rate loan
Loan made at an interest rate that fluctuates depending on a base interest rate, such as the prime rate or LIBOR. or loans they really couldn't afford in recent years, it's that a new industry has arisen to help bail them out.
Still, there is only so much these firms can do. Foreclosures are on the rise, and the peak is probably still a few years out. Foreclosures in Southern California Southern California, also colloquially known as SoCal, is the southern portion of the U.S. state of California. Centered on the cities of Los Angeles and San Diego, Southern California is home to nearly 24 million people and is the nation's second most populated region, are up almost 30 percent since January -- by 56 percent in Riverside County, 10 percent in San Bernardino San Bernardino, city, United States
San Bernardino (săn bûr'nədē`nō), city (1990 pop. 164,164), seat of San Bernardino co., S Calif., at the foot of the San Bernardino Mts.; inc. 1854. County and 16 percent in Los Angeles Los Angeles (lôs ăn`jələs, lŏs, ăn`jəlēz'), city (1990 pop. 3,485,398), seat of Los Angeles co., S Calif.; inc. 1850. County, according to according to
1. As stated or indicated by; on the authority of: according to historians.
2. In keeping with: according to instructions.
3. foreclosure tracking firm Default Research Inc.
``I started the business two years ago,'' said Tingting Zhang, president of TerraCotta Group. ``We had 90 people a day in foreclosure. As of today, the number is 295.''
She expects foreclosures to peak between 2008 and 2010 as the California real estate market continues to cool. ``It's no longer appreciating 20 to 40 percent a year.''
Zhang blames part of the increase on the creative loans and more liberal lending environment of recent years and the subsequent climb in interest rates. But there is more to the story, she said.
One factor is the changing real estate market. ``We don't have a white-hot listing market anymore. ... If people (once in default) are going to sell their house to pay off the lender, they really need to do it in a month, and they can't do that now.''
Cities like Pasadena and Long Beach might be more vulnerable to a foreclosure wave, she said, because prices have long been high in those areas, while growth is stagnant because they are mature markets. Areas like Palmdale and Lancaster and other parts of Riverside County offer somewhat of a buffer against widespread foreclosure because they are still relatively affordable and still offer great growth potential.
``Because it has depreciated Depreciated may refer to:
Aside from the loan environment, the cooling market and people taking on more debt than they could handle, Zhang attributes much of the increase in foreclosures to old-fashioned causes, like illness and job loss.
Joyce Maloney, senior counselor for mortgages and debt counseling at Consumer Credit Counseling Credit counseling (known in the United Kingdom as debt counselling) is a process offering education to consumers about how to avoid incurring debts that cannot be repaid. This process is actually more debt counseling than a function of credit education. Service of Santa Clara Santa Clara, city, Cuba
Santa Clara (sän`tä klä`rä), city (1994 est. pop. 217,000), capital of Villa Clara prov., central Cuba. and Ventura counties, with headquarters in Camarillo, said job insecurity comes up frequently in her sessions with consumers facing foreclosure.
``Jobs are just not secure anymore, and incomes are not secure anymore,'' she said. ``You see 50 to 75 percent of their income is going to housing.''
Maloney said half the increase in foreclosures is because consumers did not understand their loans or took out loans inappropriate for their income levels.
But she blames the other half on job loss, pay cuts and general indebtedness.
So what's a broke homeowner to do?
No. 1 is to get help as early as possible, preferably before going into default at all.
Some consumers make the mistake of thinking about mortgage payments in the same way they think of a credit card payment.
``Bankruptcy is no longer as threatening to lenders,'' said Zhang.
``Foreclosure is very different. If you're late on your credit card, it's acceptable even though it affects your score. But if you're late on your mortgage, it's a very serious matter.''
If you're already in default, it still pays to intervene as early as possible. There's a big difference, from the bank's point of view, between being 30 days late and being 120 days late.
And these days, foreclosure notices seem to be starting sooner, said Maloney. ``It used to be three or four missed payments. Now it's as quickly as the second missed payment,'' she said.
Even in the 11th hour, there's a lot that can be done to keep a house. One couple came to TerraCotta's office the day before their home was to be sold by the lender, Countrywide Financial Countrywide Financial Corporation (NYSE: CFC) is a diversified financial marketing and service holding company engaged primarily in residential mortgage banking and related businesses. . Countrywide coun·try·wide
adv. & adj.
Throughout a whole country; nationwide: launched a fundraising campaign countrywide; a countrywide search.
Adj. 1. agreed to postpone the sale while the house was bought by TerraCotta and put into a trust to repair the credit.
CHOOSE A PRO
Deciding who to call is not that straightforward. TerraCotta Group markets itself as a one-stop shop One-Stop Shop
A company or a location that offers a multitude of services to a client or a customer. The idea is to provide convenient and efficient service and also to create the opportunity for the company to sell more products to clients and customers. that can offer all the options available by traditional means.
``A Realtor can sell it, a lawyer can file for bankruptcy protection, and a mortgage broker can refinance,'' said marketing manager Cynthia Hogle, but a company like hers can assist with all of these.
Still, there may be situations where homeowners in default need to hire an attorney or a Realtor for other reasons. And a homeowner could certainly refinance with a mortgage broker.
But if homeowners are already in default, those loans will likely be harder to get approved. So homeowners who decide to try to refinance with a broker should choose one with specific experience in distressed situations. The bottom line is that consumers facing foreclosure need to do a lot of homework and obviously look out for scam (SCSI Configured AutoMatically) A subset of Plug and Play that allows SCSI IDs to be changed by software rather than by flipping switches or changing jumpers. Both the SCSI host adapter and peripheral must support SCAM. See SCSI. artists, notorious for preying on desperate homeowners facing eviction The removal of a tenant from possession of premises in which he or she resides or has a property interest done by a landlord either by reentry upon the premises or through a court action. .
Ideally, prospective homeowners should take time to educate themselves a bit before jumping into homeownership. Fresh Start Financial, a credit-repair company in Van Nuys that has seen foreclosures increase in the past six months, plans to start holding seminars on responsible use of credit.
``The mentality is, OK, you're buying a home for, say $650,000. It's a great price. ... You're thinking you're getting a great deal, but you're forgetting that you are still going to be paying $5,500 with insurance and interest a month,'' said Fred Lopez, a manager at Fresh Start.
``With a good credit report you could get these loans without proving income on it. We just saw someone with a 680 score, but he had a house that went into the foreclosure process. Now he's being turned down for other houses. We see a lot of people with the monster homes and cars, and they are so in debt it is insane. If you understand money, you're not going to go buy a car for $110,000. You're going to buy a 2-year old car where most of the loss will already be gone from it.''
Using the same logic, Joyce Maloney said the rise in foreclosures reflects the fact that many people who bought houses in recent years probably should not have.
``The government has said everyone should be a homeowner,'' she said. ``Well, not everybody should be a homeowner. Some are not secure enough in job opportunities to even think about it. The sad part is when someone goes through foreclosure, they usually will not buy another house. They've been burned once and don't want to be burned again.''
An extension and/or increase in amount of existing debt. best to salvage equity
Refinance - This is the preferred way to avoid foreclosure because you keep your house without doing any fundamental damage to the rest of your financial profile. Even if you are not facing default on a loan, it's advisable to change from a variable rate to a fixed rate if possible. One of the risks in refinancing, especially with a mortgage broker without experience in distressed situations, is that the new loan could be denied, leaving the homeowner even further along in default.
Private Money - This is an attractive option if the money is coming from a trustworthy source. Some consumers borrow from family. Alternatively, there are entities that serve as both mortgage brokers and real estate investors A real estate investor is someone who actively or passively invests in real estate. An active investor may buy a property, make repairs and/or improvements to the property, and sell it later for a profit. using private money. There are legitimate hard money lenders The examples and perspective in this article or section may not represent a worldwide view of the subject.
Please [ improve this article] or discuss the issue on the talk page. as well. The operating advice with all these options is be wary of con artists who prey on people desperate to keep their house. Verify the legitimacy of a company through the California Department of Real Estate or the California Association of Mortgage Brokers.
Personal bankruptcy Personal bankruptcy is a procedure which, in certain jurisdictions, allows an individual to declare bankruptcy. In other jurisdictions, bankruptcies are reserved for corporations. - In general, under a Chapter 7 bankruptcy filing, a home could be liquidated DAMAGES, LIQUIDATED, contracts. When the parties to a contract stipulate for the payment of a certain sum, as a satisfaction fixed and agreed upon by them, for the not doing of certain things particularly mentioned in the agreement, the sum so fixed upon is called liquidated damages. (q.v. as part of debt settlement. A Chapter 13 filing is for homeowners with equity who want to hold on to the house. Most financial experts say bankruptcy should be a last resort and caution against predatory bankruptcy attorneys.
photo, 2 boxes
(color) no caption (Holding on to your house)
(1) Foreclosure rate hits double digits Double Digits was a pricing game on the American television game show, The Price Is Right. Played from April 20, 1973 through May 18, 1973's show, it was played for a car and used small prizes.
Source: Default Research Inc.
(2) Refinancing best to salvage equity (see text)